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Effects of Early Pension Withdrawal on Pre-Retirement Labour Supply: Evidence from Chile during the COVID-19 Pandemic

Author

Listed:
  • Yoshimichi Murakami

    (Research Institute for Economics & Business Administration, Kobe University, JAPAN)

  • Aya Noritake

    (Graduate School of Economics, Kobe University, JAPAN)

Abstract

Although the defined contribution pension system in Chile had not permitted pension withdrawals before retirement age, the Chilean Congress approved laws allowing early withdrawals as an economic support measure in response to the COVID-19 pandemic. This study empirically analysed the effects of mainly the third early pension withdrawal on pre-retirement labour supply using data from a nationally and regionally representative household survey for 2022. To address potential endogeneity from self-selection into pension withdrawals, we applied inverse probability weighting based on propensity score estimation. The results showed that individuals who withdrew their pensions worked longer hours and had a higher probability of employment. These effects were more pronounced among women, while they were statistically insignificant for men. The findings were robust to household-level analysis, which additionally showed that pension savings withdrawn by women were more likely to be used for home repairs. Therefore, the early pension withdrawal, rather than reducing labour supply through the income effect, encouraged female labour supply, possibly due to improved remote-work conditions.

Suggested Citation

  • Yoshimichi Murakami & Aya Noritake, 2026. "Effects of Early Pension Withdrawal on Pre-Retirement Labour Supply: Evidence from Chile during the COVID-19 Pandemic," Discussion Paper Series DP2026-10, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2026-10
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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2026-10.pdf
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    Keywords

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    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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